“After all the false starts and dashed hopes of the past two years, I’m reluctant to count my chickens before they’ve actually been signed in the Oval Office. Still, it appears that Democrats have finally agreed on another major piece of legislation, the Inflation Reduction Act. And if it does become law, it will be a very big deal.
First, would the law, in fact, reduce inflation? Yes, probably — or at least it would reduce inflationary pressures. That’s because the legislation’s increased spending, mainly on clean energy but also on health care, would be more than offset through its tax provisions; so it would be a deficit reduction act, which other things being equal would make it disinflationary.
But you want to think of the Inflation Reduction Act as being like the National Interstate and Defense Highways Act of 1956, which probably did strengthen national defense a bit but mainly benefited America by investing in the nation’s future. This bill would do the same, and maybe even more so.”